Real estate: is it possible to rise from rock-bottom level?
25-04-2012
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Restructuring market, businesses
Nguyen Trong Ninh, Deputy Head of the Department for Housing Management and Real Estate Market under the Ministry of Construction underlines some reasons for their business in the doldrums, which stem from poor management skills and lack of long-term development strategies and plans.
One of the six issues remaining to be addressed is related to institutions and legal documents about 10 laws within which, businesses find themselves in a difficult position to keep the property market purring along because of credit and financial strains, high interest rates on medium and long-term loans, and other strict procedures.
Dr Can Van Luc, senior adviser and President of the Executive Board of the Bank for Investment and Development of Vietnam (BIDV) attributes the sluggishness of the property market in recent times to uncontrolled speculation and ineffective operations in the cement, iron & steel and brick production sectors. In his view, it is imperative to restructure the real estate market and improve the effectiveness of investment in this field by letting domestic businesses transfer their projects to potential foreign investors. This will offer more opportunities for them to access bank loans more easily.
Sharing this view, Phan Thanh Mai, General Secretary of the Real Estate Association says this is a very difficult time for small and medium-sized enterprises but also a good lesson for them to learn from the need for proper strategies, business administration and risk controls.
Some signs of bouncing back
Luc says commercial banks are offering interest rates of 16-17 percent for real estate businesses. They are not high in the current situation when the State, banks and businesses themselves are required to find a way out of the crunch time. The State needs to support the property market by applying tax breaks and streamlining administrative procedures. Banks should adjust their debt structure, lower interest rates and provide consultancy for businesses on what should be done properly, including reducing production costs, improving operational efficiency, developing long-term strategies and engage in project transfers.
Mai affirms that the Government, the State Bank of Vietnam and the Ministry of Construction have adopted new policies to help the property market bounce back and build public trust in this area.
For steady growth in the property market, it is essential to create the best possible conditions for businesses to access bank loans.
Accordingly, the State will develop a pilot savings model for housing development, solve issues left over from 2011 such as revising regulations on personnel income tax payment in real estate transaction and granting construction licenses for commercial houses with a small area of 30-50 m2, and consider allowing foreigners to purchase houses in Vietnam.
